11 November 2014

Advanced Photonix's Telecom revenues dip due to pause in demand for 100G transmission products

For its fiscal second-quarter 2015 (ended 26 September 2014), Advanced Photonix Inc (API) of Ann Arbor, MI, USA (which designs and makes APD, PIN, and FILTRODE photodetectors, HSOR high-speed optical receivers, and T-Ray terahertz instrumentation) has reported net sales of $7.8m, up 3% on $7.5m a year ago and up 2% on $7.65m last quarter. Telecom sales rose $268,000 from last year but slowed sequentially by $477,000. However, this was more than offset by sequential growth in Test & Measurement, Medical and Military sales.

“The second quarter was lower than expected due to a combination of a slowdown in telecommunication revenues and the continuing push out of F-35 contract activity,” says president & CEO Richard Kurtz. “Our major customers for 100G transmission products are seeing a pause by domestic service providers in capital expenditures. This is simply a temporary situation and we expect to see a return in ordering later in our fiscal year,” he adds.

Gross margin has fallen from 37% a year ago to 33.7%, driven by the growing mix of 100G HSOR product sales at competitively priced levels and a decline in Terahertz revenue.

Due to cost-reduction measures taken during last years' second quarter, operating expenses have been cut from $3.3 (44.3% of sales) a year ago to $2.9m (37.2% of sales) a year ago. Non-GAAP net loss has hence been halved from $300,000 ($0.01 per diluted share) a year ago to $152,000 ($0.00 per diluted share). Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and stock compensation) was $74,000, up from $20,000 a year ago.

The firm finished the quarter with $1.15m in cash and cash equivalents compared with $120,000 at the end of March, given the receipt in June of $2.9m in net proceeds from a firm underwritten placement of 6.2 million shares by B Riley and Co. In addition, Advanced Photonix had access to about $2.6m in additional funds available on its line of credit at quarter end. About $1.2m was drawn on the line of credit. Net working capital as of 26 September was $4.2m.

“We received a $1.6m contract for the Rolling Airframe Missile (RAM) program,” notes Kurtz. “This award will grow our military revenues for the remaining balance of the year,” he adds.

On the terahertz side, Advanced Photonix has expanded its valued-added reseller (VAR) distribution chain with the addition of Seltek Ltd, a privately held company located in Turkey but with systems installed around the world. Advanced Photonix has completed the VAR training and shipped the first system last month. Advanced Photonix is also launching the Single Point Gauge (SPG) Terahertz product, targeted at off-line inspection for thickness measurements.

On its HSOR product development roadmap, Advanced Photonix has started to sample its new 10G APD receiver optical sub-assembly (ROSA) product for the fiber-to-the-home market (with revenues expected next fiscal year.

“The recent pause in telecommunication and contract revenues has caused us to revaluate the year-over-year growth projections for this year,” says Kurtz. “We are now positioning ourselves for flat growth year over year,” he adds. “We do believe that the combination of new products in the pipeline today, the release of the F-35 contract, and a return to normalized capital expenditures by service providers, will happen in our fourth quarter and lead to a resumption of growth.”

Tags: Advanced Photonix

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